ASIC Probes Crypto Firm Blockchain Global Collapse

The Australian Securities and Investment Commission (ASIC) has opened a probe into the failed crypto company Blockchain Global (BGL) following an investigation by The Guardian Australia that revealed links between two of the company’s directors, Sam Lee and Ryan Xu, and a number of alleged crypto scams, including HyperVerse.

ASIC initially declined to take further action against Blockchain Global in 2022 after the company’s liquidators referred it to the regulator for possible breaches of the Corporations Act. ASIC says it will now undertake an assessment of the liquidators’ reports following the publication of The Guardian Australia’s investigation.

What Was Blockchain Global?

Blockchain Global was an Australian crypto company that collapsed in 2021 owing creditors an estimated AUD$58 million. The directors of the company were Sam Lee, Ryan Xu and Allan Guo.

In the wake of its collapse, liquidators found the directors may have committed numerous criminal acts, including breaching their director’s duties, committing breaches of trust and performing unreasonable director-related transactions.

Following coverage of BGL’s links to HyperVerse by The Guardian Australia in 2023, an ASIC spokesperson told the publication in January 2024: “ASIC confirms that it is assessing reports from the liquidator in relation to BGL.”

ASIC Chair Joe Longo has been talking up the regulator’s stance on enforcement in 2024. He told the AFR this month that ASIC would ‘push the envelope’ in 2024 and pursue more legal action across various sectors, including crypto.

Into The HyperVerse

HyperVerse is an alleged crypto scam that appears to have functioned as a ponzi scheme, in which early investors’ returns were paid using funds from later investors. HyperVerse claimed to generate revenue by mining Bitcoin, but there is no evidence that this actually took place.

The scheme was promoted by a number of paid shills, including Chuck Norris and Apple co-founder Steve Wozniak in the US — Lee and Xu promoted HyperVerse in Australia.

Analysis by the blockchain analytics company Chainalysis found that globally, HyperVerse investors lost a combined total of US$1.3 billion.

Blockchain Global’s Links To HyperVerse

Blockchain Global director Sam Lee has denied being an important part of the HyperVerse scheme, stating his participation was limited to support roles such as providing technology and equipment and performing funds management services. 

However, the available evidence suggests his involvement went much deeper.

Both Lee and fellow Blockchain Global director, Xu, appeared at the HyperVerse global launch event in 2021 alongside the scheme’s fake CEO, Stephen Reece Lee—portrayed by a paid actor who played no part in running the business. Lee and Xu also appeared prominently in promotional materials for related crypto schemes such as HyperFund and HyperCapital, in addition to promoting HyperVerse.

The Guardian Australia investigation revealed links between Lee and HCash, the cryptocurrency used by HyperVerse, with liquidators identifying two transactions with a total value of $500,000 linked to HCash. Documents also show that the company behind the HCash cryptocurrency, HCash Tech Pty Ltd, was owned by Xu, as was another company involved with HyperVerse, Collinstar Capital.

The organisational chart for HyperTech, the company behind HyperVerse, also shows that it was made up of an alliance between HCash, HCash Foundation, Blockchain Global and Collinstar Capital.

For his part, Lee claims that HyperVerse did not operate as a scam, insisting the accusations against him are misinformation. Speaking to The Guardian Australia via WhatsApp, Lee said: “people on the internet continues [sic] to make things up”. Meanwhile the whereabouts of his fellow director, Xu, are currently unknown.